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Summary:

Mark Cuban is always good for a rant, and one of his favorite pet peeves is Internet video. This week, he’s complaining that all those evangelists of over the top video are ignoring the way average Americans use their TV, which is for cable and VOD, […]

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Mark Cuban is always good for a rant, and one of his favorite pet peeves is Internet video. This week, he’s complaining that all those evangelists of over the top video are ignoring the way average Americans use their TV, which is for cable and VOD, according to Cuban. “The future of TV is TV,” he concludes. “That is what consumers want.”

I hate to say it, but Cuban is right, at least in part. Most U.S. consumers still get their TV programming from cable, and the number of people paying for some type of TV service have in fact been increasing as people have been buying HDTVs. 90 percent of us couch potatoes now pay for TV, according to numbers released by Nielsen last week. However, Cuban assumes that this isn’t likely to change anytime soon — and he ignores everything from connected TVs to Netflix. Time for a few quick lessons, Mark.

1. Sports TV is Going Online

Sports has long been a cable TV stable, and Cuban — who owns the Dallas Mavericks — makes fun of YouTube testing the waters of live sports coverage with its recent IPL live stream. His verdict: Those are old ideas that didn’t work 15 years ago, so they won’t work now. Except they do. CBS streamed 11.7 million hours of video with March Madness on Demand, and the network’s video player was accessed by 8.3 million unique visitors throughout the tournament.

I know, that’s still dwarfed by broadcast numbers, but guess how many people watched March Madness via cable VOD? How about zero? CBS used to distribute much of the NCAA’s tournament for catch-up via VOD, but didn’t bother this time around. It just wasn’t worth the effort.

2. Netflix is leading the charge

Cuban essentially argues that consumers don’t want anything but cable VOD. I guess those 14 million Netflix subscribers didn’t get the message. Not only are they voting for cheaper and better ways to get their movies, they’re also increasingly embracing over-the-top video. 55 percent of Netflix’s subscribers used the company’s Watch Instantly service in the first quarter. And no, we’re not just talking about streaming a quick video to your laptop anymore. Netflix is now available through connected TVs, Blu-ray players, game consoles, the iPad… and many more devices. In fact, the company aims to be on 100 devices before the end of the year.

3. It’s not about set-top boxes

A big part of Cuban’s rant is spent on making fun of people connecting their PCs to their TVs. Cuban is right, that’s not what the average consumer wants to do (even though I’m sure many of our readers have more luck with it than Cuban). Even dedicated set-top boxes for online video can be a hassle. However, millions of consumers already have connected their TVs, oftentimes without even realizing, since Blu-ray players offer a gateway to the Internet. Many of them stream Netflix now, and that could be expanded in the future.

Then there are game consoles. There are more gaming devices in American households than DVRs, and the majority of them are already hooked up to the Internet. Netflix streams video to all major game consoles, and Sony as well as Microsoft have increasingly embraced live sports and exclusive programming. In fact, Microsoft is reportedly in talks for an Xbox-only TV channel.

4. The Future of TV is Connected

By the way, who said that you’ll need a second device at all to connect your TV to the net? An increasing number of TV sets are Internet-ready out of the box, and those devices are becoming more and more powerful. Sony, for instance, is expected to announce a TV set powered by a TV-specific flavor of Google’s Android operating system later this month.

5. Cord cutting is real

Yeah, I know. I just said that more people are subscribing to paid TV services than ever, so how can cord cutting possibly be anything but a fad thought up by online video enthusiasts? Well, how about this: The Yankee Group estimated a few days ago that one in eight U.S. households are going to pull the plug or scale back on cable or satellite TV.

Those findings are not entirely isolated: Less than 22 percent of U.S. consumers think that their cable TV subscription is worth what they pay for it, and loyalty is generally very low: Two thirds would switch if someone offered them a better deal. Even more remarkable — those very consumers that love cable VOD as much as Cuban apparently does are also the ones that are most likely to cut the cord. Consumers thinking about leaving their cable company watched more than four times as many movies via VOD than households faithful to cable. In other words: The trendsetters and heady spenders are ready to leave, and they’re getting more and more options to do so.

Photo courtesy of (CC-BY-SA) Flickr user Keith Allison.

Related content on GigaOm Pro: Connected Consumer Market Overview, Q1 2010 (subscription required)

  1. Internet TV is the future whether Mark Cuban believes it or not, I cut the cable cord over one year ago and I will probably never go back.
    The cable companies keep raising their prices and keep delivering the same crap with commercials.
    If you live in the city or suburbs get an OTA antenna and watch the networks in glorious HD for free. Buy a Roku or internet capable Blu-ray player and you can get all the entertainment you want.

    BTW: Mark Cuban is a cry baby and I’m glad the Mavericks lost the playoffs.

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    1. I think there’s more to it. Cuban might be right (in part) about what’s happening now, but he’s glossing over the reality that the opportunity in the TV space is huge, that distinctions between the TV set, laptop, and mobile phone are disappearing and, most importantly, consumers will eventually get the content they want in the way they want it.

      We’re going to overrun them with quantity of content– and supersede them by consuming that content in a bazillion different ways.

      Plus, consumers aren’t dumb. We can plug in a set-top box if the outcome is a better user experience, more content than we like, and especially if we’re saving money along the way. We’ve done it before (see: TiVo) and we’ll do it again.

      There’s more in a blog post I wrote summarizing this space (and how to disrupt it) here: http://www.derekflanzraich.com/2010/05/how-to-disrupt-television/

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  2. Interesting that you led the article with sports, which has been the only strikeout in my cord cutting adventure. Over the air HD is great for football, but there is still no good method for getting MLB and NHL games when you live in-market.

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  3. It makes no sense at all to pay $80 or more to get access to the less than 1% of video content that you actually want. I think that most content will be delivered online in the next 10 or 20 years, and that it will be more common to not have satellite or cable TV.

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  4. Right now, Mark Cuban is right, but I think within the next few years he will be very very wrong. However, this won’t happen until one killer product comes out that changes people’s behavior.

    It has to be something you can just go buy in a store, plug in, and it just works. It must be simple to use, like the iPad or iPhone.

    I’d bet Apple upgrades the AppleTV to the iPhone/iPad OS, so that you can run apps, but that they make it a game changer with a new controller. TV remotes are old tech. Something like the Nintendo Wii Controller, or Xbox’s Project Natal is what i’m thinking. People would flock to it instead of cable, because it’s a better experience.

    I think Apple or Google is in the best position to make that happen. Without a killer product to replace cable, the majority of people will stick with cable for the foreseeable future because of it’s convenience.

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  5. [...] we disagreed, and couldn’t resist making our case with a post titled The Future of TV: Five Lessons for Mark Cuban — prompting him to pen a reply, which he sent via email. With his permission, we’re [...]

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  6. The thrust of Mark’s post is how “ease of use” is what drives consumption. So long as getting internet video to your television requires more that a few very easy steps, the mass market will resist adopting it.

    I personally think he overestimates VOD. The cable companies have pushed that technology for more than ten years with very limited success. They’re marketing it strongly again as a replacement for video stores. It’s a little early to call the success of the new campaign guaranteed.

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  7. Everyone is right and everyone is wrong. Does that settle the debate? Hands down, content is still king. The trends have nothing to do with delivery. Internet is NOT a ‘Radio-to-TV’ transition, nor is it a ‘Movie-to-TV’ event in history. Since the dawn of broadcast entertainment, there has always been a cost to reach an audience. The internet eliminated that cost. That is it. That is the story. For the first time, a content programmer does not need a network or a high-priced FCC license. But the majority of content online (including most web series out there) is home movie footage. So sports and news will continue to dominate the online VOD business. And once this dust settles, most hacks will fall back into media desk jobs and the true artists will dominate the content arena. If you’re lucky, youtube and all the wannabe freaks will be relegated to community access fodder without an audience. When you analyze it, there is very little difference between TV and internet except for price and convenience. The audience will watch their shows wherever they play, whether TV or Internet. The internet has mostly changed the game for the ‘programmers’, not the ‘viewers’.

    And dismiss Cuban. Celebrities are not gods. Cuban just got lucky with a sale of Broadcast.com during the bubble. The same company today would be worth $9.99. He is ultimately a lottery winner. Without his money, he’s a useless idiot.

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    1. Hey Todd, jealous and bitter much?

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  8. [...] Read the rest of this post on the original site Tagged: Internet, Voices, digital, media, television, Janko Roettgers, Mark Cuban, New TeeVee | permalink Sphere.Inline.search("", "http://voices.allthingsd.com/20100506/the-future-of-tv-five-lessons-for-mark-cuban/"); « Previous Post ord=Math.random()*10000000000000000; document.write(''); [...]

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  9. The world is not always black or white. For sure there are shades of gray. But that is how things are today. And tomorrow is another day.
    The newteevee is happening, but it has not happened yet.

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  10. It’s very easy to agree that the future of TV is on the internet but I don’t see anything on the horizon that will make this transition happen.

    I imagine that it will be baby step, baby step, baby step, BOOM – giant step. It could take a few years of a few decades, but it isn’t here today.

    The picture quality, content offerings and ease of use of Cable TV (I’d say the same for satellite) is unmatched by anything on the internet.

    I will continue to pay Comcast (which I am OK with) until another company offers as good or better picture quality (I’ve never seen anything through the internet that is good as High Definition cable TV) with the same convenience (DVR) for the same (or better) content for less money.

    I wrote this reply based on this blog post and the comments and just now read the entire piece by Mark Cuban. I think he is pretty spot on.

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